Over the past two months, Indian salt-to-software conglomerate Tata Group has been engaged in talks to invest in hyperlocal delivery startup Dunzo to strengthen its presence in the soon-to-be USD 18 billion grocery delivery space. However, the deal seems to have come to a standstill over how much stake Tata can acquire in Dunzo.
Dunzo doesn’t want to be owned by the Mumbai-headquartered conglomerate by selling it a majority stake, although it is open to the idea of Tata being the single largest shareholder, said a report by local media Economic Times, citing sources. Tata, however, has been vying for a controlling stake in the Bengaluru-based startup.
Dunzo’s co-founder and CEO Kabeer Biswas is reportedly looking to raise anywhere between USD 100–120 million at a valuation of USD 500–600 million, without ceding control of the company, the report added.
The six-year-old startup is one of the very few companies that have expertise in making fast deliveries. Currently, it delivers groceries and essentials, fruits and vegetables, meat, pet supplies, food, and medicines in major cities and is processing over USD 200 million in annualized gross merchandise value.
Dunzo began its journey as a WhatsApp group in 2015 with four engineering graduates, Ankur Aggarwal, Dalvir Suri, Kabeer Biswas, and Mukund Jha. At the time, people could post their requests for personal items like books, flowers, parcels, lunch boxes to be picked up from one location and get it delivered to another.
The platform quickly aroused users’ interest, and when order numbers soared to 500 a day on WhatsApp, it built an app for delivery partners in 2016 to streamline daily deliveries. However, it was only in 2017 that the company launched its consumer-facing app, where it started categorizing different products and types of deliveries. Soon, it partnered with neighborhood stores and restaurants.
The Google-backed startup has now emerged as one of the leading companies in the quick commerce segment, where companies deliver goods and services within 45 minutes of ordering. Its biggest rival is SoftBank-backed food delivery giant Swiggy, which got into hyperlocal deliveries of groceries and other products in late 2019.
According to a report by research firm RedSeer, India’s quick commerce sector, whose offerings fall into different buckets—consumables like packaged foods, beverages, groceries, medicines, and pet supplies; and long-tail categories such as flowers, gifts, books, and small electronic items—is set to reach USD 5 billion by 2025.
Aside from Swiggy, Dunzo competes with e-grocers BigBasket and Grofers, e-commerce firm Amazon, and Swiggy’s nemesis Zomato. With Dunzo in tow, Tata is likely to have the upper hand in the booming online grocery and quick commerce segments.
The USD 106 billion-Tata acquired BigBasket, the market leader in online grocery, earlier this year to boost its in-house e-grocery operations. The 153-year-old conglomerate had quietly entered the e-grocery space in 2017 with the lunch of its grocery delivery app called StarQuik, which leverages the network of retail outlets under Tata’s Star brand to offer daily essentials, fresh produce, bakery, beauty, and home needs, among other things.
Last month, BigBasket said it plans to introduce a quick-delivery service over the next few months. Meanwhile, Swiggy is ramping up its 15–30 minutes delivery service, and Grofers is working on delivering groceries in ten minutes in ten cities. Earlier this week, Dunzo rolled out Dunzo Daily in Bengaluru, a new service that intends to deliver essentials in 19 minutes.
According to the ET report, Dunzo has a partnership with BigBasket under which it uses one of the e-grocer’s dark stores to facilitate its deliveries. The startup is now looking to build onto this partnership to power its own express deliveries. However, nothing has been said yet on whether Dunzo will look at executing quick deliveries for BigBasket.